The answer & explanation for this question is given in the attachment below.
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annua
l coupon payments. Suppose a German company issues a bond with a par value of €1,000, 15 years to maturity, and a coupon rate of 6.5 percent paid annually. If the yield to maturity is 7.6 percent, what is the current price of the bond?
1 answer:
Answer:
€903.50
Explanation:
We use the present value formula to determine the current price of the bond which is shown in the attachment below:
Given that,
Future value = €1,000
Rate of interest = 7.6%
NPER = 15 years
PMT = €1,000 × 6.5% = €65
The formula is shown below:
= -PV(Rate;NPER;PMT;FV;type)
So, after solving this, the current price of the bond is €903.50
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